Developing Democracy

Democratizers' Surprisingly Bright Development Record

July 6, 2004

The past 25 years have seen an astonishing advance in the number of democracies around the world. Some 87 previously nondemocratic countries have made discernible advances towards democracy during this time. Of these democratizers, 70 have per capita incomes below US$4,000, making this a largely developing country phenomenon. Today, two-thirds of all countries live under some form of self-governance—a reversal from just 15 years ago.

Despite this tectonic shift in global governance patterns, the sentiment that a poor country must first develop economically before it can democratize persists. The stellar growth of autocratic Singapore, China, and Vietnam as well as the experiences of South Korea, Taiwan, and Chile are trotted out as justification for this seemingly hard but true reality. Low income countries that do start down a democratic path are bound to fail or at least take a sharp economic hit in the process, according to this view. Indeed, authoritarian governments throughout the Middle East, the former Soviet Union, and elsewhere are quick to cite this concern when deflecting growing pressure to democratize.

A closer look at the development track record tells a different story, however. Most of the 87 contemporary democratizers have realized economic growth as fast as, if not faster than, the norm for their respective regions over the past five years. That is, democratizers such as Poland, Hungary, Bulgaria, the Baltic states, Mexico, Senegal, and Mozambique are typically growing more rapidly than countries with autocratic governments such as Syria, Saudi Arabia, Uzbekistan, North Korea, Cuba, Zimbabwe, Togo, and Gabon. The pattern holds up for the entire 25-year period of the contemporary democratization era. This is so despite the fact that a full quarter of (typically underperforming) autocratic governments do not publicly report their economic data and therefore are not even factored into these comparisons.

The differences are even more striking when we consider indicators of well-being such as life expectancy, illiteracy, and access to clean drinking water. Low-income democratizers enjoy demonstrably better living standards than autocracies. Consider infant mortality rates, an indicator many development experts consider the best all around measure of social welfare progress. Autocratic countries with per capita incomes below US$2,000 averaged 79 infant deaths per 1,000 live births during the 1990s. Democratizers in the same income category and time period typically experienced 62 infant deaths. Given that many of these countries still rely on their agricultural sectors for the bulk of their employment and income, democratizers' track record of posting agricultural yields that are on average 25 percent superior to those of developing country autocracies is similarly noteworthy.

Simply put, democratic governance is good for development. This is not to say that there are not exceptions; clearly, there are. However, the pattern of superior developmental performance among countries that are on a democratic path is robust. The traditional view that political liberalization inevitably precipitates populist economic policies and economic contraction has not been demonstrated in practice when compared to autocratic countries in the same regions or income groups.

In many ways, this is intuitive— what is government but a mechanism by which a society orders its priorities? The more representative, transparent, and accountable this process, the more balanced the outcomes will be compared to a system that is narrowly based and lacking incentives for responsiveness to citizen interests.Why Do Some Democratizers Do So Much Better?
Given that democratizers more than hold their own when it comes to development, the more interesting question is why some democratizers do so much better than others in their development efforts? That is, if democracy is a plus for development, why aren't all democratizers thriving?

A significant degree of this difference can be explained by the extent to which democratizers have established institutional mechanisms of shared power, or what I refer to as "accountability institutions." These include checks on the chief executive (for example, a legislature that can initiate legislation and block egregious policies pursued by the executive branch), the separation of political party influence from state structures (evidenced by a merit-based civil service), the separation of economic opportunity from political authority as seen through an autonomous private sector, an independent judiciary, and a free press.

Democratizing states that move to establish and strengthen these institutions of shared power tend to develop more rapidly. Specifically, looking at the experience of democratizers over the last 25 years, it is apparent that annual per capita growth rates for democratizers in the top quartile of a composite measure of these accountability institutions grew, on average, more than a full percentage point faster than democratizers in the bottom quartile of these accountability rankings—2.2 percent versus 1.0 percent. So, democratizers as diverse as Botswana, South Africa, Senegal, Slovenia, Estonia, Czech Republic, Chile, Dominican Republic, and Thailand that have established comparatively stronger institutional mechanisms protecting against the arbitrary use of power have realized substantially more economic growth than other democratizers such as Algeria, Cameroon, Burkina Faso, Guinea, Tajikistan, Kazakhstan, and Georgia, where restraints on political monopolization have been weak. Analogous growth differences hold across income levels.

Similar differentials are apparent on measures of social progress. Democratizers with stronger institutions of accountability score, on average, 15 to 25 percent higher on indicators of life expectancy, access to medical service, and primary school enrollment among others. Countries in the top quartile of accountability scores for all low income (that is, below US$2,000 per capita) democratizers typically have had infant mortality rates of 37 per 1,000 live births in the 1990s compared to a 79 per 1,000 mortality rate for democratizers in the lower quartile of the accountability rankings. The disparities only widen when the under US$1,000 income category is considered. Understanding the development advantage of democratizers thus involves assessing the extensiveness of their checks and balances on power—as distinguished from those that may solely adopt some of the symbols of democracy, such as elections. Countries that democratize in deed and not just name tend to develop more rapidly.

Progress on any of the individual accountability dimensions tends to improve development outcomes. Thus, strengthening the independence of the judiciary, the civil service, or the private sector each has positive effects for development. In practical terms, however, it is rare for a country to distinguish itself on a sole accountability element. A society commonly makes progress across a number of fronts simultaneously. This suggests that a shift in norms and expectations regarding the limits of political power occurs. A "culture of accountability" begins to take root. And it is the cumulative effect of these enhanced norms that is most important for transferring political change into development improvements. Such a shift occurred in Kenya following the election of President Mwai Kibaki in late 2002, representing the first transfer of power between political parties in Kenyan history. Having campaigned on an anti-corruption platform, upon taking office Kibaki instituted new standards of transparency and disclosure for conflicts of interest among senior government officials. Acting on this cue, ordinary Kenyans began refusing to pay the ubiquitous bribes demanded by Kenyan police. In some cases, incensed crowds would chase bribe-seeking police officers straight off their beats. Government contracts awarded under questionable circumstances, previously accepted as the norm, were increasingly challenged in the courts by the general public. Corrupt judges have been forced to resign. While Kenya still has a way to go, the indirect benefits to the Kenyan economy, in terms of reduced transaction costs, time saved, and improved economic efficiency resulting from the higher level of accountability, are surely substantial.

To the extent that any single accountability factor determines development progress, an independent media stands out. Of all 87 democratizers considered, only Cambodia and Angola have realized economic development in the late 1990s at a rate faster than their regional norm without also establishing at least an intermediate degree of press freedoms. Therefore, while a free press is often invoked for its importance in strengthening democracy, its contribution to material progress may be equally relevant.

More informed deliberation prior to the adoption of a policy, heightened scrutiny and pressure to rectify policies producing poor results, and strengthened market confidence created by the greater transparency fostered by a free press all contribute to this phenomenon. In other words, an independent media creates an environment in which democracy's self-correcting mechanisms can come into play. The end result of this is a more pragmatic set of development policies.

A free press may also be indispensable to the realization of the other accountability structures. Consider the rule of law. Without the transparency and scrutiny fostered by independent media, the scope for misuse of public monies by government officials is substantially greater. This, in turn, affects the prospects for a competitive private sector. The recent experience of the petroleum industry in India is indicative of this phenomenon. Only after an investigation by the newspaper Indian Express was it discovered that in state after state, the bulk of licenses for gas stations were going to members of the governing Bharatiya Janata Party and their friends and relatives. The scandal forced Indian Prime Minister Atal Bihari Vajpayee to cancel the allotments for more than 3,000 gas stations, resulting in greater economic competition and lower prices for consumers. In short, it was the transparency generated by the independent media that invigorated the rule of law.

Accordingly, Vladimir Putin's systematic efforts to disembowel an independent media in Russia will likely be self-defeating. His effort to control the flow of information diminishes the rule of law, the autonomy of the private sector, and checks on the executive branch. While he certainly enjoys additional maneuverability under a state-owned media, this advantage is destined to be fleeting. In the process, he is inexorably undermining his stated priority of establishing a strong foundation for Russia's sustained economic growth. As tales of government extortion and intimidation of entrepreneurs increase, foreign direct investment will dwindle further.

Pseudo-Democratizers
The realization that democratizers with relatively stronger institutions of shared power tend to grow more rapidly raises important issues over how we categorize democratizers. The classic litmus test—holding multi-party elections—is increasingly unsatisfactory. With the evolving international norm of according legitimacy only to those leaders that have been democratically elected, heads of authoritarian states have craftily attempted to co-opt the language and trappings of democracy so as to make the grade without ever seriously intending to share power. President Hosni Mubarak's Egypt is the prototypical case. Presidential elections are held every six years and opposition parties, a civil society, and a free press are ostensibly allowed. However, these democratic processes are heavily circumscribed. Political opponents are frequently harassed, licenses of civil society organizations critical of the government are regularly rescinded, and strict self-censorship is imposed. Political power comfortably remains within the hands of Mubarak. Similarly, Rwanda went through an electoral charade late last year in order to anoint Paul Kagame as president. Opposition parties were allowed but were frequently prevented from holding rallies or appearing on state-sponsored television. Not only were supporters afraid to show up at opposition rallies but, intimidated by government threats, opposition candidates themselves would at times preemptively cancel planned gatherings. Some recent examples of autocrats trying to masquerade as democrats in order to attain a degree of international credibility include Azerbaijan's transition of power from father to son in the guise of elections, Robert Mugabe's manipulation of democratic procedures in Zimbabwe, Iran's Guardian Council (representing the unelected clerical hierarchy) barring of 2,400 moderate candidates from running in parliamentary elections, and General Pervez Musharraf's elaborately staged national referenda in Pakistan, to name a few.

This more sophisticated class of "pseudo-democratizers" has learned that they can often avoid international scrutiny so long as they maintain some of the more visible rituals of democratic governance. And to a large extent, they are right. In addition to setting fuzzy and embarrassingly low standards, the international community has yet to figure out how to deal with authoritarian states dressed up in democratic regalia. Arguments for constructive engagement, patience for the slow pace, and a misguided focus on the "glass half-full" argument continue to be convincingly made. The neo-authoritarians have played on this ambiguity to suggest real change is taking place, when all the while, they are, in fact, tightening their grip on power. Unsurprisingly, the democratizer-growth relationship for electoral democracies is only one quarter as strong as when the extent of a democratizer's accountability structures is taken into consideration.

Including this collection of pseudo-democratizers in the broader class of countries undergoing genuine political change, predictably obscures our understanding of the democratizers' development track record. The challenge to the international community is to match the sophistication of the democratic charlatans by devising methods to better discriminate which states are making real, if incremental, progress towards greater political participation and power sharing. Assessing the extent to which accountability institutions have been created provides a potential lens to do so.Democracy and Accountability
As one would expect, democracies and countries on the road to democracy generally have stronger systems of accountability in place than autocratic states. This creates the self-correcting processes that allow political institutions to moderate and facilitate positive economic and social welfare outcomes. Those democracies and democratizers with relatively stronger accountability institutions within their respective income or regional cohort have typically excelled in their developmental outcomes. Interestingly enough, the same principle applies when we look at groupings of authoritarian countries. Those authoritarian regimes with relatively stronger accountability structures have realized more rapid growth. In other words, the pattern of strong accountability institutions and steady economic development is consistent regardless of whether a country is democratic, democratizing, or authoritarian. It is just that democracies have a considerably higher likelihood of creating such accountability structures.

Understanding the relationship between accountability and development thus sheds light on a couple of missing pieces in the democracy-development puzzle. First, it is widely recognized that almost all of the world's prosperous states are democracies. The real debate has always been about how poor countries get there from where they are starting. That is, how do we reconcile the outstanding record of the industrialized democracies with the checkered results generated by democratizers? Focusing on the depth of accountability institutions, a common trait of both the industrialized democracies and democratizers that have grown more rapidly, provides at least part of the answer. Poor countries that started down the democratization path and established strong accountability structures have generally grown rapidly; democracy and development do go together. The prescription of a prolonged period of authoritarian purgatory before enjoying democratic redemption is unwarranted. For that matter, formerly low-income countries like Malta, Mauritius, Botswana, and post-Pinochet Chile have grown so rapidly and steadily that they have made considerable headway in closing the prosperity gap with the industrialized democracies. While at varying stages in the process, Thailand, Poland, Hungary, the Baltic countries, Mozambique, and the Dominican Republic are recent democratizers also on a development fast track. Democratizers that have moved less cogently to establish institutions that constrain political and economic monopolization have generally grown less quickly.

Second, one of the perplexities to the democracy-development debate has been the stellar economic performance of a selected number of authoritarian countries, most notably in East Asia. How have these exceptional autocratic growers bucked the trend? Their strength of accountability institutions has something to do with it. This category of rapidly-growing autocrats, controlling for income, scores 20 to 40 percent better on the various categories of accountability compared to other authoritarian countries. In short, economically vibrant autocracies are clear-cut outliers.

This helps us to understand the anomalous nature of the fast-growing authoritarians. Yes, they do exist but they are far from representative and therefore a poor basis on which to guide development policy. Specifically, over the past 25 years there have been eight authoritarian countries that have enjoyed rapid economic growth for over a decade: Bhutan, China, Egypt, South Korea, Singapore, Taiwan, Tunisia, and Vietnam. This compares to the roughly 60 other authoritarian governments that experienced stagnant growth during this time period. In other words, it is not the authoritarian character of the fast-growing states that explains their remarkable development. The wait for development in low accountability states such as Turkmenistan, Azerbaijan, Belarus, Sudan, Cameroon, Burma, Haiti, and Syria before the promotion of democracy will be a long wait indeed.Policy Implications
At present, development funding to low-income democracies, as a share of GDP, is no greater than that to authoritarian states. To better reduce poverty and propel economic growth, this should change. International investors and development agencies should instead identify countries undertaking genuine political reform and target resource flows to them with the aim of accelerating their economic growth and material development. The track record suggests that the impact and returns from such investment will be maximized. Directing capital flows to these countries, coupled with the enhanced economic progress these democratizers would experience, accentuates incentives for other developing countries to initiate democratic political reform in earnest.

The United States' recently inaugurated Millennium Challenge Account is a potentially important instrument for such a democracy-focused development strategy. While substantially scaled-back from US President George Bush's original proposal, this US$1 billion annual fund for countries deemed to be ruling democratically, investing in their populations, and to be establishing basic economic rights could facilitate a marked shift in development outlays towards democratizers. To be effective and to ensure that the incentive structure of this program clearly resounds throughout the developing world, however, robust democratic governance standards should be maintained in selecting eligible countries. This would signal to non-democratic countries that hope to participate in the program that the prospect of gaining access to increased development funding is linked to their pursuit of genuine democratic reforms. The humanitarian instinct to loosen the standards, thereby allowing more countries to qualify for this new pot of resources, would inadvertently undercut the distinctive purpose of this program and should therefore be resisted.

Pursuing a democracy-centered development strategy recognizes that political orientation is a central feature to development, not just one other desirable objective. Such a perspective requires better integration into the foreign policies of the industrialized democracies. It is not a matter that can be solely relegated to their development agencies. In the United States, for example, it requires greater harmonization of the of the policies of the State, Treasury, and Commerce Departments—and in an age of shifting security threats, the Defense Department and Central Intelligence Agency. What is required is no less than a coherent foreign policy toward the developing world—something that has not existed in the United States for decades. Within agencies whose primary mission is development, such as the US Agency for International Development, better integration of experts dealing with democracy and development issues is needed. Despite their evident complementarities, there remains substantial stove-piping among specialists in these fields. Given the close relationship between democratic governance and positive development outcomes, this compartmentalization is a handicap.

Recognizing the central role that accountability institutions play in development also provides a framework for more effectively targeting development resources. While moving towards a "culture of accountability" and the adoption of political institutions that facilitate shared power and ensure checks and balances are ultimately up to the society in question, certain external efforts can assist this process. Perhaps most important is holding countries claiming to be democracies to international standards of openness, shared power, and political participation. By enforcing a high bar for international democratic legitimacy—with the diplomatic and capital market benefits this branding entails—the international community is ensuring that an incentive structure is in place to propel international reforms, which in turn have a better chance of being sustained. Meanwhile, internal efforts should focus on enhancing the capacity of democratizing countries' institutions of accountability: strengthening the caliber of the civil service, the judiciary, the oversight of the executive branch, and the autonomy of the private sector from political influences. Particular attention should be paid to the establishment of independent media. A free press augments the ability of other institutions, including civil society, to exert the checks and balances against centralized control so critical for sustained development. Mechanisms by which the general public can become better informed of policy debates, actions of public officials, management of public finances, and the functioning of markets will enhance transparency, efficiency, and pressure for corrective action. International efforts can help develop a cadre of trained journalists and media institutions with a clear understanding of their roles and responsibilities. Technical support for the management and marketing skills needed to run regional and national newspapers, television, and radio stations can also better ensure the financial and technological independence of these ventures over time. Notably, these efforts should not be limited to the public sector. Mobilizing private investment into media enterprises, most viably with local partners, further enhances prospects for their sustainability.

There is a compelling case for encouraging democratization in the developing world. Most countries that pursue political reform do economically better. They are not destined to political instability and economic stagnation as established thinking would have us believe. This, of course, is on top of the many moral and justice-based advantages of democracy. However, the policy indecisiveness bred by the conventional view risks unnecessarily propping up dictatorial or neo-authoritarian governments to the detriment of their populations and the world at large. Waiting for a country to develop economically before promoting democratic reform is a non sequitur in nearly all cases. Rather, what is needed is an increasingly sophisticated strategy on the part of the world's leading democracies to delineate genuine democratizers from those that are simply going through the motions—and then to ensure that adequate levels of financial and political support are available to foster their success.

Countries undertaking the difficult steps of political liberalization are engaged in one of the most challenging and important political processes of our time. In aggregate, they are shaping global political norms for the 21st century. It is incumbent on the established democracies to better understand this process so as to effect a more decisive and consistent influence.